Microchip Buys Taiwan’s ISSC Tech

BROOKLYN, NY — Microchip Technology Inc. made a move to make its first major overseas acquisition with a $328.5 million deal to acquire Taiwanese fabless chip company ISSC Technologies Corp., which sells Bluetooth chips aimed at the growing IoT sector.

Microchip's motivation behind the purchase stems from its need to add proprietary low-power Bluetooth products to its product portfolio. Microchip already has an arsenal of chip products tailored for the embedded market, including microcontrollers, analog chips, Flash-IP, as well as WiFi and Bluetooth modules. However, Microchip's Bluetooth modules employ chips made by other companies. By gaining ISSC's wireless expertise in providing Bluetooth solutions, Microchip believes it has leverage to be a major chip player in the IoT market.

"This acquisition provides us with our own standalone Bluetooth chips as well as enables significant cost-reduction of our Bluetooth solutions," said Ganesh Moorthy, chief operating officer of Microchip, in a conference call with analysts following the announcement of the deal. "This enhances our value proposition to be a complete supplier for the Internet of Things market."

ISSC makes Bluetooth chips designed into a variety of wireless audio applications, including headset and speakers. Although wireless audio has been its main focus, ISSC's Bluetooth products are getting designed into a growing number of embedded applications, including healthcare, sports and fitness, mobile point-of-sale (POS), and home appliances. However, it doesn't have a presence in automotive, which is a key market for Microchip. In addition, the majority of its customers are located in Taiwan, China, and Japan, Moorthy said.

"As Bluetooth becomes a ubiquitous standard in many applications, helped along by the growth of smartphones and tablets that are Bluetooth-enabled, the embedded market has become a fast-growing market for ISSC solutions," Moorthy said.

Microchip will also add Bluetooth software stacks to its already extensive library, which the company says provides the seamless communications and security protocols that are required for Internet connectivity.

ISSC has 27 proprietary products in portfolio, with 119 patents granted and 91 patents pending. It garnered revenue of approximately $69.2 million in 2013, and yielded gross and operating margins of 46.2% and 18.9%, respectively. It has $34.2 million in cash and investments on its balance sheet and no debt.

Microchip will gain 216 employees, mostly in Taiwan, as well as small teams in Shenzhen, China and Torrance, Calif. The deal is expected to close in the fourth calendar quarter of 2014.

Microchip has been on a buying spree. Last month, it completed its $394 million cash deal to acquire high-voltage analog and mixed-signal vendor Supertex Inc. In November 2013, it acquired Belgium-based EqcoLogic, a provider of equalizer and coaxial transceiver products for an undisclosed sum. Also last year, it bought Novocell, a supplier of antifuse-based embedded memory IP, for an undisclosed amount. In 2012, it acquired fabless ASSP provider Standard Microsystems Corp. (SMSC) for the $939 million, giving it a presence in two key vertical markets: wireless audio and computing.

Microchip definitely is on buysing spree and they really have a clear analysis behind every acquisition. The consumer and IoT are going to grow much more bigger in future and surely Microchip will play a key role.

Microchip has done a fairly good job providing chips for the 8-bit microcontroller market, but they have had some mis-steps recently. They were also "late to the party" in 32-bit. They eventually acquired MIPs, but only long after others had joined the ARM bandwagon.

Microchip's PIC line should have been the processor in Arduinos, a domain that ATMEL owns totally. And while some may think that Arduinos are toys, a huge number of products that are in existence today started with a $30 (or so) Arduino hacked together with sensors. Companies then took those 'kludges' and put them on one board to make a final product. Most 3-D printers and quadcopter controllers are simply Arduinos with "shields" (add-on boards) merged into one board. And when those ATMEL processors are not powerful enough, designers have usually turned to 32-bit STMicro parts. Now, there are huge libraries of routines ATMEL parts, and a rising number for STMicro parts.

Those routines were written by individuals. No company could ever provide as much (usually) working source code as millions of users. Microchip has tried, but has not been very successful in fostering a very large community of developers that share code for its chips.

I do use Microchip parts currently. But I'm going to have to change soon for most of my designs. I'm writing too much code by myself. I need to use parts that can use easily-obtainable, open source routines for nearly anything I want to do. Hello Atmel! Hello STMicro!